SUB-ADVISORY AGREEMENT
TOUCHSTONE SMALL CAP VALUE FUND
TOUCHSTONE FUNDS GROUP TRUST
This SUB-ADVISORY AGREEMENT is made as of December 6, 2010, as
amended
as of September 10, 2012, by and between TOUCHSTONE ADVISORS, INC., an
Ohio
corporation (the "Advisor"), and ▇▇▇▇▇▇▇▇, RACE & ▇▇▇▇▇, INC., a Florida
corporation (the "Sub-Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by
Touchstone Strategic Trust (the "Trust"), a Delaware business trust organized
pursuant to a Declaration of Trust dated May 19, 1993 (as
amended) and registered as an open-end management investment company under
the Investment Company Act of 1940 (the "1940 Act"), to provide
investment advisory services with respect to certain assets of the
Touchstone Small Company Value Fund (the "Fund"); and
WHEREAS, the Sub-Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Sub-Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Fund, and the Sub-
Advisor is willing to furnish such services to the Advisor and the
Fund;
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Sub-Advisor. In accordance with and
subject to the Investment Advisory Agreement between the Trust and
the Advisor, attached hereto as Exhibit A (the "Advisory Agreement"),
the Advisor hereby appoints the Sub-Advisor to manage the investment
and reinvestment of that portion of the assets of the Fund allocated
to it by the Advisor (the "Fund Assets"), in conformity with the
Fund's currently effective Registration Statement, prospectus and
Statement of Additional Information and subject to the control
and direction of the Advisor and the Trust's Board of Trustees, for
the period and on the terms hereinafter set forth. The Sub-Advisor
hereby accepts such employment and agrees during such period to
render the services and to perform the duties called for by this
Agreement for the compensation herein provided.
The Sub-Advisor shall at all times maintain its registration as an
investment advisor under the Investment Advisers Act of 1940 (the
"Advisers Act") and shall otherwise comply in all material respects
with all applicable laws and regulations, both state and federal.
The Sub-Advisor shall for all purposes
herein be deemed an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to
act
for or represent the Trust in any way or otherwise be deemed an agent of the
Trust or the Fund.
2. Duties of the Sub-Advisor. The Sub-Advisor will provide the
following services and undertake the following duties:
a. The Sub-Advisor will manage the investment and
reinvestment of the Fund Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Fund and
in conformity with the Fund's currently effective Registration Statement
, prospectus and Statement of Additional Information and any directions
which the Advisor or the Trust's Board of Trustees may give from time
to time with respect to the Fund. In furtherance of the foregoing,
the Sub-Advisor will make all determinations with respect to the
investment of the Fund Assets and the purchase and sale of portfolio
securities and shall take such steps as may be necessary or advisable
to implement the same. The Sub-Advisor also will determine the manner
in which voting rights, rights to consent to corporate action and
any other rights pertaining to the portfolio securities will be
exercised. The Sub-Advisor will render regular reports to the
Trust's Board of Trustees and to the Advisor (or such other advisor
or advisors as the Advisor shall engage to assist it in
the evaluation of the performance and activities of the Sub-Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Fund and the Sub-Advisor as the Trust or the
Advisor shall from time to time request; provided, however, that in the
absence of extraordinary circumstances, the individual primarily
responsible for management of Fund Assets for the Sub-Advisor will not
be required to attend in person more than one meeting per year with the
trustees of the Trust.
b. The Sub-Advisor shall immediately notify the Advisor
if the Sub-Advisor reasonably believes that the value of any security
held by the Fund may not reflect fair value. The Sub-Advisor agrees
to provide any pricing information of which the Sub-Advisor is aware
to the Advisor and/or any Fund pricing agent to assist in the
determination of the fair value of any Fund holdings for which market
quotations are not readily available or as otherwise required in
accordance with the 1940 Act or the Fund's valuation procedures for
the purpose of calculating the Fund's net asset value in accordance
with procedures and methods established by the Board.
c. Regulatory Compliance.
(i) The Sub-Advisor agrees to comply with the
requirements of the 1940 Act, the Advisers Act, the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable
federal and state laws, rules, regulations and case law that relate
to the services and relationships described hereunder and to the
conduct of its business as a registered investment adviser.
In selecting the Fund's portfolio securities and performing
the Sub-Adviser's obligations hereunder, the Sub-Advisor shall cause
the Fund to comply with the diversification and source of income
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment
company. The Sub-Advisor shall maintain compliance procedures that it
reasonably believes are adequate to ensure the compliance with the
foregoing. No supervisory activity undertaken by the Advisor shall
limit the Sub-Advisor's full responsibility for any of the foregoing.
(ii) The Sub-Advisor has adopted a written code of
ethics that it reasonably believes complies with the requirements of
Rule 17j-1 under the 1940 Act, which it will provide to the Advisor
and the Fund. The Sub-Advisor shall ensure that its Access Persons
(as defined in the Sub-Advisor's Code of Ethics) comply in all
material respects with the Sub-Advisor's Code of Ethics, as in effect
from time to time. Upon request, the Sub-Advisor shall provide the
Fund with (i) a copy of the Sub-Advisor's current Code of Ethics, as
in effect from time to time, and (ii) a certification that it has
adopted procedures reasonably necessary to prevent Access Persons from
engaging in any conduct prohibited by the Sub-Advisor's Code of
Ethics. No less frequently than annually, the Sub-Advisor shall
furnish a written report, which complies with the requirements of
Rule 17j-1, concerning the Sub-Advisor's Code of Ethics to the Fund
and the Advisor. The Sub-Advisor shall respond to requests for
information from the Advisor as to violations of the Code
by Access Persons and the sanctions imposed by the Sub-Advisor. The
Sub-Advisor shall immediately notify the Advisor of any material
violation of the Code, whether or not such violation relates to a
security held by any Fund.
(iii) The Sub-Advisor shall notify the Trust's Chief
Compliance Officer and Advisor immediately upon detection of (i) any
material failure to manage any Fund in accordance with its investment
objectives and policies or any applicable law; or (ii) any material
breach of any of the Fund's or the Advisor's policies, guidelines or
procedures. In addition, the Sub-Advisor shall provide a quarterly
report regarding each Fund's compliance with its investment objectives
and policies and applicable law, including, but not limited to the 1940
Act, the Code, and the Fund's and the Advisor's policies, guidelines or
procedures as applicable to the Sub-Advisor's obligations under this
Agreement. The Sub-Advisor acknowledges and agrees that the Advisor
may, in its discretion, provide such quarterly compliance certifications
to the Board. The Sub-Advisor agrees to correct any such failure
promptly and to take any action that the Board and/or the Advisor may
reasonably request in connection with any such breach. The Sub-Advisor
shall also provide the officers of the Trust with supporting
certifications in connection with such certifications of Fund financial
statements and disclosure controls pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
The Sub-Advisor will promptly notify the Trust in the event (i) the Sub-
Advisor is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by
any court, public board, or body, involving the affairs of the Trust
(excluding class action suits in which a Fund is a member of the
plaintiff class by reason of the Fund's ownership of shares in the
defendant) or the compliance by the Sub-Advisor with the federal or
state securities laws or (ii) the controlling stockholder of the Sub-
Advisor changes or an actual change in control resulting in an
"assignment" (as defined in the 1940 Act) has occurred or is otherwise
proposed to occur.
(iv) The Sub-Advisor shall maintain separate books and
detailed records of all matters pertaining to the Fund's assets advised
by the Sub-Advisor required by Rule 31a-1 under the 1940 Act (other than
those records being maintained by the Advisor, custodian or transfer
agent appointed by the Fund) relating to its responsibilities provided
hereunder with respect to the Fund, and shall preserve such records for
the periods and in a manner prescribed therefore by Rule 31a-2 under the
1940 Act (the "Fund Books and Records"). The Fund Books and Records
shall be available to the Advisor and the Board at any time upon request
shall be delivered to the Trust upon the termination of this Agreement
and shall be available for telecopying without delay during any day the
Fund is open for business.
d. The Sub-Advisor shall provide support to the Advisor with
respect to the marketing of the Fund, including but not limited to:
(i) permission to use the Sub-Advisor's name as provided in Section
5, (ii) permission to use the past performance and investment history
of the Sub-Advisor with respect to a composite of other funds managed
by the Sub-Advisor that are comparable, in investment objective and
composition, to the Fund, (iii) access to the individual(s) responsible
for day-to-day management of the Fund for marketing conferences,
teleconferences and other activities involving the promotion of the
Fund, subject to the reasonable request of the Advisor, (iv) permission
to use biographical and historical data of the Sub-Advisor and
individual manager(s), and (v) permission to use the names of those
clients pre-approved by the Sub-Advisor to which the Sub-Advisor
provides investment management services, subject to receipt of the
consent of such clients to the use of their names.
e. The Sub-Advisor will, in the name of the Fund, place
orders for the execution of all portfolio transactions in accordance with
the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act
of 1933, as such registration statements may be in effect from time
to time. When placing orders with brokers and dealers, the Sub-
Advisor's primary objective shall be to obtain the most favorable
price and execution available for the Fund, and in placing such orders
the Sub-Advisor may consider a number of factors, including, without
limitation, the overall direct net economic result to the Fund (
including commissions, which may not be the lowest available but
ordinarily should not be higher than the
generally prevailing competitive range), the financial strength and
stability of the broker, the efficiency with which the transaction will
be effected, the ability to effect the transaction at all where a large
block is involved and the availability of the broker or dealer to stand
ready to execute possibly difficult transactions in the future.
Consistent with the Conduct Rules of the Financial Industry Regulatory
Authority (FINRA), and subject to seeking most favorable price and
execution and compliance with Rule 12b-1(h) under the 1940 Act, the Sub-
Advisor may select brokers and dealers to execute portfolio transactions
of the Fund that promote or sell shares of the Fund. The Sub-Advisor is
specifically authorized, to the extent authorized by law (including,
without limitation, Section 28(e) of the 1934 Act, to pay a broker or
dealer who provides research services to the Sub-Advisor an amount of
commission for effecting a portfolio transaction in excess of the amount
of commission another broker or dealer would have charged for effecting
such transaction, in recognition of such additional research services
rendered by the broker or dealer, but only if the Sub-Advisor determines
in good faith that the excess commission is reasonable in relation to
the value of the brokerage and research services provided by such broker
or dealer viewed in terms of the particular transaction or the Sub-
Advisor's overall responsibilities with respect to discretionary
accounts that it manages, and that the Fund derives or will derive a
reasonable benefit from such research services. The Sub-Advisor will
present a written report to the Board of Trustees of the Trust, at least
quarterly, indicating total brokerage expenses, actual or imputed, as
well as the services obtained in consideration for such expenses, broken
down by broker-dealer and containing such information as the Board of
Trustees reasonably shall request.
f. The Sub-Advisor shall maintain errors and omissions
insurance coverage in an appropriate amount and shall provide prior
written notice to the Trust (i) of any material changes in its insurance
policies or insurance coverage; or (ii) if any material claims will be
made on its insurance policies. Furthermore, the Sub-Advisor shall,
upon reasonable request, provide the Trust with any information it may
reasonably require concerning the amount of or scope of such insurance.
g. In the event of any reorganization or other change in
the Sub-Advisor, its investment principals, supervisors or members of its
investment (or comparable) committee, the Sub-Advisor shall give the
Advisor and the Trust's Board of Trustees written notice of such
reorganization or change within a reasonable time (but not later than 30
days) after such reorganization or change.
h. The Sub-Advisor will bear its expenses of providing
services to the Fund pursuant to this Agreement except such expenses as
are expressly undertaken by the Advisor or the Trust.
3. Compensation of the Sub-Advisor.
a. As compensation for the services to be rendered and
duties undertaken hereunder by the Sub-Advisor, the Advisor will pay to
the Sub-Advisor a monthly fee equal on an annual basis to XX% of the
average daily net assets of the Fund, without regard to any total
expense limitation of the Trust or the Advisor. Such fee shall be
computed and accrued daily. If the Sub-Advisor serves in such capacity
for less than the whole of any period specified in this Section 3a,
the compensation to the Sub-Advisor shall be prorated. For purposes
of calculating the Sub-Advisor's fee, the daily value of the Fund
Assets shall be computed by the same method as the Trust uses to compute
the net asset value of the Fund for purposes of purchases and
redemptions of shares thereof.
b. The Sub-Advisor reserves the right to waive all or a
part of its fees hereunder.
4. Activities of the Sub-Advisor. The Sub-Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings
and at such other times as such Board of Trustees reasonably shall
request, subject to the limitation on personal attendance at such
meetings set forth in Section 2a) (i) the financial condition and
prospects of the Sub-Advisor, (ii) the nature and amount of
transactions affecting the Fund that involve the Sub-Advisor and
affiliates of the Sub-Advisor, (iii) information regarding any potential
conflicts of interest arising by reason of its continuing provision of
advisory services to the Fund and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request
regarding the Fund, the Fund's performance, the services provided by
the Sub-Advisor and affiliates of the Sub-Advisor to the Fund as
compared to its other accounts and the plans of, and the capability
of, the Sub-Advisor with respect to providing future services to the
Fund and its other accounts. The Sub-Advisor agrees to submit to the
Trust a statement defining its policies with respect to the allocation
of business among the Fund and its other clients.
The Sub-Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including
the Sub-Advisor's statement of financial condition) and will hereafter
supply to the Advisor, promptly upon the preparation thereof, copies
of all amendments or restatements of such document.
5. Use of Names. Neither the Advisor nor the Trust shall use
the name of the Sub-Advisor in any prospectus, sales literature or other
material relating to the Advisor or the Trust in any manner not
approved in advance by the Sub-Advisor; provided, however, that the
Sub-Advisor will approve all uses of its name which merely refer in
accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and provided further, that
in no event shall such approval be unreasonably withheld. The Sub-
Advisor shall not use the name of the Advisor or the Trust
in any material relating to the Sub-Advisor in any manner not approved
in advance by the Advisor or the Trust, as the case may be; provided,
however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the
appointment of the Sub-Advisor hereunder or which are required by the
SEC or a state securities commission; and, provided further, that in
no event shall such approval be unreasonably withheld.
6. Liability of the Sub-Advisor. The Sub-Advisor shall
indemnify and hold harmless the Trust and all affiliated persons thereof
(within the meaning of Section 2(a)(3) of the ▇▇▇▇ ▇▇▇) and all
controlling persons (as described in Section 15 of the 1933 Act)
(collectively, the "Sub-Advisor Indemnitees") against any and all
losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) by reason of or arising out
of: (a) the Sub-Advisor being in material violation of any applicable
federal or state law, rule or regulation or any investment policy or
restriction set forth in the Funds' Registration Statement or any written
guidelines or instruction provided in writing by the Board, or (b)
the Sub-Advisor's willful misfeasance, bad faith or gross negligence
generally in the performance of its duties hereunder or its reckless
disregard of its obligations and duties under this Agreement. As used
in this Section 6, the term "Sub-Advisor" shall include the Sub-
Advisor and/or any of its affiliates and the directors, officers and
employees of the Sub-Advisor and/or any of its affiliates.
7. Limitation of Trust's Liability. The Sub-Advisor
acknowledges that it has received notice of and accepts the limitations
upon the Trust's liability set forth in its Declaration of Trust. The
Sub-Advisor agrees that (i) the Trust's obligations to the Sub-Advisor
under this Agreement (or indirectly under the Advisory Agreement) shall
be limited in any event to the Fund Assets and (ii) the Sub-Advisor shall
not seek satisfaction of any such obligation from the holders of shares
of the Fund, other than the Advisor, nor from any Trustee, officer,
employee or agent of the Trust.
8. Force Majeure. The Sub-Advisor shall not be liable for
delays or errors occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority,
national emergencies, work stoppages, fire, flood, catastrophe, acts of
God, insurrection, war, riot, or failure of communication or power
supply. In the event of equipment breakdowns beyond its control, the
Sub-Advisor shall take all reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
9. Renewal, Termination and Amendment.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, until December 6, 2012; and it shall
continue thereafter provided that such continuance is specifically
approved by the parties and, in addition, at least annually by (i) the
vote of the holders of a majority of the outstanding voting securities
(as herein defined) of the Fund or by vote of a majority of the Trust's
Board of Trustees and (ii) by the vote of a majority of the Trustees who
are not parties to this Agreement or interested persons of either the
Advisor or the Sub-Advisor, cast in person at a meeting called for the
purpose of voting on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor upon not more than sixty (60)
days' nor less than thirty (30) days' written notice delivered or mailed
by registered mail, postage prepaid, to the Sub-Advisor; (ii) by the
Sub-Advisor upon not less than sixty (60) days' written notice delivered
or mailed by registered mail, postage prepaid, to the Advisor; or (iii)
by the Trust upon either (y) the majority vote of its Board or (z) the
affirmative vote of a majority of the outstanding voting securities of
the Fund. This Agreement shall terminate automatically in the event of
its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the majority
of the outstanding voting securities of the Fund affected by such
change.
d. The terms "assignment," "interested persons" and
"majority
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. Severability. If any provision of this Agreement shall
become or
shall be found to be invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Notice. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-
paid, to the other party at such address as such other party may
designate in accordance with this paragraph for the receipt of such
notice. Until further notice to the other party, it is agreed that
the address of the Trust and that of the Advisor for this purpose
shall be ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and that
the address of the Sub-Advisor shall be ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
12. Miscellaneous. Each party agrees to perform such further
actions and execute such further documents as are necessary to
effectuate the purposes hereof. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the State
of Ohio and the Sub-Advisor consents to the jurisdiction of courts,
both state or federal, in Ohio, with respect to any dispute under this
Agreement.. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the
undersigned,
thereunto duly authorized, all as of the day and year first above
written.
TOUCHSTONE ADVISORS, INC.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇ ▇▇▇▇▇▇
SVP, CFO Title: SVP
▇▇▇▇▇▇▇▇, RACE & ▇▇▇▇▇, INC.
Attest:
/s/▇▇▇▇ ▇. Race By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇ ▇. Race Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Co-CEO Title: Co-CEO